• The UK lifestyle brand hailed a "resilient performance against very difficult trading conditions".
Profit before tax decreased by 26.1% to GBP50.9m  (US$66.9m) from GBP68.8m in 2018

Profit before tax decreased by 26.1% to GBP50.9m (US$66.9m) from GBP68.8m in 2018

UK lifestyle brand Ted Baker has sounded an optimistic note despite posting a 26.1% drop in pre-tax profit for the year.

In its annual results announcement today (21 March), acting CEO Lindsay Page said the group remains "well positioned" for long term development after "a number of significant investments".

Page was appointed as acting CEO with immediate effect after the company's founder Ray Kelvin took a voluntary leave of absence in December after the company's board learned of "further serious allegations" regarding his conduct. He has since resigned from the company.

Today, shares in Ted Baker slipped by more than 2.7% as profit before tax for the 52 weeks to 26 January tumbled 26.1% to GBP50.9m (US$66.9m) from GBP68.8m last year. Profit before tax and exceptional items decreased by 14.3% to GBP63m as expected.

The group said performance has been impacted by the "very difficult" trading conditions throughout the year including competitive discounting across the retail sector, consumer uncertainty, the "well-publicised" challenges facing some of its  UK trading partners and the unseasonable weather across its global markets at different points throughout the period.

Group gross margin was down 270 basis points to 58.3% from 61% in 2018.

Group revenue, meanwhile, climbed 4.4% in the period to reach GBP617.4m from GBP591.7m, while retail sales, including e-commerce rose 4.2% to GBP461m.

In the UK and Europe, Ted Baker reported sales of GBP315m, an increase of 4.6% year-on-year. North America retail sales were up by 4.7% to GBP125.7m, while Rest of the World retail sales were down 4.7% to GBP20.3m.

E-commerce sales, meanwhile, jumped 20.4% to GBP121.7m.

"Ted Baker has continued to grow across each of the brand's distribution channels despite difficult trading conditions across a number of the Group's global markets," Page said. "This resilient sales performance again reflects the strength of the brand, the talent of our teams, and the quality of our collections."

"We have made a number of significant investments to ensure that Ted Baker remains well positioned for long term development. We are excited by our spring/summer collections and the board remains focussed on identifying opportunities in the evolving retail market to further expand the brand."

More turbulent times for Ted Baker

Emily Salter, retail analyst at GlobalData, notes despite a "decent" rise in group revenue, this is nothing like the growth previously experienced by, and expected from, premium lifestyle brand Ted Baker. 

"The past year has shown that premium brands are not immune to the problems faced by midmarket retailers, as the growth is far off the 11.4% increase in FY2017/18 as retail sales dragged down impressive online revenue growth," she said. "Luckily, the brand's online platform is able to offset poorer performance in physical locations as e-commerce made up 19.7% of total sales during the year."

Salter adds, however, it is doubtable how long this can be maintained as physical locations continue to struggle with declining footfall and weak consumer confidence persists.

"Despite the shift online, Ted Baker continues to open a few physical locations, including department store concessions across the UK and Europe. The brand should focus on premium department stores to avoid the troubles faced by the likes of House of Fraser and Debenhams."

Meanwhile, Ted Baker was keen to point out the causes of its profit decline, Salter says, as being the 'non-cash impacts' of additional product costs discovered after a systems update, the weak pound and a write-down in the value of inventory.

She adds: "Retailers have been up against currency fluctuations for a while, and this is likely to continue due to the impacts of Brexit, so Ted Baker must factor this continued volatility in on an ongoing basis. The decline in profit is also in the context of a retail environment characterised by regular and heavy discounting. The brand must ensure it does not succumb to this, to retain its margins and to ensure that consumers do not become accustomed to discounting and therefore change their purchasing habits."

Yet, despite the troubles experienced by Ted Baker over the last year, the brand is positioned for future growth, Salter notes, as long as it focuses on maintaining product continuity and its brand identity.

"It has shown its ability to bounce back from a weaker trading performance before, as it experienced 12.2% sales growth over Christmas after disappointing third-quarter results, so the next year will be a test of consumer desire for the brand and its resilience in a tough retail environment.''